The U.S. debt ceiling deadline lies just a few weeks away, raising the prospect of the nation defaulting on loans, seeing its credit rating downgraded and being plunged into a recession.
And there's no sign U.S. President Barack Obama or congressional Republicans are ready to budge on their positions on what to do about the debt ceiling.
President Obama once again made his case for raising the debt ceiling during a White House press conference today (Monday) and faulted Republicans for what he portrayed as a misguided position.
"They will not collect a ransom in exchange for not crashing the American economy," President Obama said. "The full faith and credit of the United States of America is not a bargaining chip."
If the GOP lawmakers refuse to increase the U.S. debt ceiling – they're holding out for dollar-for-dollar spending cuts – the president said markets could "go haywire," government payments including Social Security and military personnel checks would be delayed and the economy would slide into recession.
"It would be a self-inflicted wound on the economy," President Obama said. "It would slow down our growth and tip us into recession. To even entertain the idea of this happening is irresponsible. It's absurd."
President Obama: Exceeding U.S. Debt Ceiling Deadline "Absurd"
The president said raising the $16.4 trillion debt ceiling wouldn't authorize more spending but would enable Congress to "pay for bills they've already racked up."
Republicans pushed back, saying they won't increase the debt ceiling without corresponding spending cuts, even if their refusal to do so pushes the country into default or forces a government shutdown.
"The American people do not support raising the debt ceiling without reducing government spending at the same time," House Speaker John Boehner, R-OH, said in a response to the president's comments. "The consequences of failing to increase the debt ceiling are real, but so too are the consequences of allowing our spending problem to go unresolved. Without meaningful action, the debt will continue to act as an anchor on our economy, costing American jobs and endangering our children's future."
The U.S. hit the debt ceiling on Dec. 31, the day before approval of the 11th-hour fiscal cliff deal after intense debate.
Since then, the nation hasn't exceeded the U.S. debt ceiling only because of "extraordinary measures" by the Treasury Department enabling the government to pay its bills.
But those measures will carry us through only mid-February-March, leaving little time to reach a deal.
Republicans: "We've Come to the End of the Road"
Republicans say they'll hold firm in their position – even if it means default or a government shutdown – because the stakes are too high not to, what with the national debt now at about 73% of gross domestic product.
"I think it is possible that we would shut down the government to make sure President Obama understands that we're serious," House Republican Conference Chairwoman Cathy McMorris Rodgers told Politico. "We always talk about whether or not we're going to kick the can down the road. I think the mood is that we've come to the end of the road."
When the country last approached the U.S. debt ceiling, in 2011, it came close to defaulting on its debt and had its AAA credit rating stripped by Standard & Poor's for the first time ever.
If no U.S. debt ceiling deal is reached this time, the country will most likely receive credit rating downgrades from multiple rating agencies. That, in turn, could send equity markets into a tailspin and the economy back into a recession.
President Obama had said in 2011 he would not negotiate on the debt ceiling, which has been increased 75 times since 1962, then ended up doing so, ultimately leading to the fiscal cliff debate.
But the U.S. debt ceiling has been raised one time too many, warned a GOP lawmaker.
"For too long, the pitch was, 'We'll deal with it next time,'" Rep. Jason Chaffetz, R-UT, told Politico. "No one wants to default, but we are not going to continue to give the president a limitless credit card."
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Why the U.S. Debt Ceiling Debate is a Bigger Deal than the Fiscal Cliff
- Money Morning:
Why a U.S. Credit Rating Downgrade is On the Way
Double trouble: House GOP eyes default, shutdown